Everest Re Group Reports Third Quarter 2008 Earnings

Everest Re Group, Ltd. (NYSE: RE) reported third quarter 2008 after-tax operating income¹, which excludes realized capital gains and losses of $12.6 million, or $0.21 per share, compared to after-tax operating income¹ of $232.5 million, or $3.68 per diluted share, in the third quarter of 2007. Including net realized capital gains and losses, the Company reported a net loss of $233.1 million, or $3.80 per share, for the third quarter of 2008 compared to net income of $246.6 million, or $3.90 per diluted share, for the same period last year.

For the nine months ended September 30, 2008, after-tax operating income¹ was $383.2 million, or $6.20 per share, compared to $713.7 million, or $11.19 per diluted share, for the same period in 2007. Including net realized capital gains and losses, the Company had a net loss of $2.2 million for the first nine months of 2008, or $0.04 per share, compared to net income of $827.0 million, or $12.96 per diluted share, for the first nine months of 2007.

Operating highlights for the third quarter of 2008 included the following:

• The GAAP combined ratio in the third quarter was 115.0% compared to 86.6% in the same period last year. Pre-tax catastrophe losses, net of reinstatement premiums, primarily emanating from Hurricanes Gustav and Ike, were $267.4 million in the quarter. Catastrophe events added 34.2 points to the combined ratio in the quarter compared to 3 points in the third quarter of 2007. Reserve development for the current period was minimally favorable.
• Net after-tax realized capital losses totaled $245.7 million for the quarter compared to net after-tax realized capital gains of $14.1 million in the same period last year. Write-downs for other than temporary impairments, primarily emanating from financial sector bond holdings, comprised $131.1 million of this quarter’s net loss. The remainder of the quarter’s loss was about evenly split between fair value accounting adjustments principally related to equity securities and net realized capital losses on sales of securities.
• Gross written premiums were $999.2 million for the quarter, 7% lower than in the same period in 2007. Reinsurance premiums, across all segments, were down 5%, with reinstatement premiums on catastrophe covers adding 4% to the quarter’s totals. Insurance segment premiums were 15% lower than in the third quarter of 2007 as written premiums were impacted by softer worker’s compensation, public entity and contractors markets as well as the timing of new business.
• Net investment income was $164.5 million, 5% lower than in the third quarter of 2007. Reduced income from limited partnership investments and lower yields on fixed maturity investments were the principal cause of the decline.
• Cash flow from operations was $375.4 million compared to $356.0 million for the same quarter in 2007. The Company had net tax recoveries of $97.4 million in the third quarter of 2008 compared to net tax payments of $107.4 million in the third quarter of 2007.
• Shareholders’ equity ended the quarter at $5.0 billion down from $5.7 billion at December 31, 2007, reflective of year-to-date net unrealized losses on investments of $355.4 million, share repurchases of $150.7 million and dividend payouts of $89.1 million. Book value per share at the end of the quarter was $82.02 compared to $90.43 at December 31, 2007.
• Since year end 2007, the Company has repurchased 1.6 million of its common shares at an average price of $92.35. Since January 2007, the Company has repurchased 4.2 million of its common shares at an average price of $94.31. The total cost to date of the repurchased shares under this program is $392.3 million. The Company's cumulative share repurchase authorizations allow for additional repurchases of up to 5.8 million shares.

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, "This quarter was marked by significant losses on both the underwriting and investment side, as two sizeable hurricanes in the gulf occurred in tandem with a meltdown in the financial markets. Our conservative capital management and investment strategies enabled us to withstand these tumultuous events and maintain our position of strength. We believe we are in a strong position to continue to serve our clients as well as capitalize on opportunities going forward.”

This news release contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federal securities laws. These statements involve risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements made on behalf of the Company. These risks and uncertainties include the impact of general economic conditions and conditions affecting the insurance and reinsurance industry, the adequacy of our reserves, our ability to assess underwriting risk, trends in rates for property and casualty insurance and reinsurance, competition, investment market fluctuations, trends in insured and paid losses, catastrophes, regulatory and legal uncertainties and other factors described in our latest Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Everest Re Group, Ltd. is a Bermuda holding company that operates through the following subsidiaries: Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. Everest Reinsurance (Bermuda), Ltd., including through its branch in the United Kingdom, provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the U.S. Everest Indemnity Insurance Company offers excess and surplus lines insurance in the U.S. Additional information on Everest Re Group companies can be found at the Group’s web site at www.everestre.com.

A conference call discussing the third quarter results will be held at 8:30 a.m. Eastern Time on October 21, 2008. The call will be available on the Internet through the Company’s web site or at www.streetevents.com.

Recipients are encouraged to visit the Company’s web site to view supplemental financial information on the Company’s results. The supplemental information is located at www.everestre.com in the "Financial Reports” section of the "Investor Center”. The supplemental financial information may also be obtained by contacting the Company directly.

¹The Company generally uses after-tax operating income, a non-GAAP financial measure, to evaluate its performance. After-tax operating income consists of net income excluding after-tax net realized capital gains (losses) as the following reconciliation displays:

Although net realized capital gains (losses) are an integral part of the Company’s insurance operations, the determination of net realized capital gains (losses) is independent of the insurance underwriting process. The Company believes that the level of net realized gains (losses) for any particular period is not indicative of the performance of the underlying business in that particular period. Providing only a GAAP presentation of net income makes it more difficult for users of the financial information to evaluate the Company’s success or failure in its basic business, and may lead to incorrect or misleading assumptions and conclusions. The Company understands that the equity analysts who follow the Company focus on after-tax operating income in their analyses for the reasons discussed above. The Company provides after-tax operating income to investors so that they have what management believes to be a useful supplement to GAAP information concerning the Company’s performance.